Community property division rules help protect both parties at the end of a marriage. Regardless of who earned more, both spouses typically have an interest in the income either spouse earned during the marriage and any assets acquired with that income.
When couples divorce, community property statutes apply to the marital estate. The spouses need to divide their marital property. If they cannot reach an agreement on how to do so, then they can ask the courts to decide the final allocation of their community property. Most of the shared resources accumulated during the marriage are subject to division.
However, each spouse may be able to set aside certain resources as their separate property that is not subject to division. Those assets may become the foundation for rebuilding financially after divorce. What types of property are typically excluded from inclusion in the marital estate?
Many spouses have valuable separate property
As previously mentioned, income and assets acquired during marriage are typically subject to division during divorce proceedings. Assets acquired before or after the marital relationship usually aren’t part of the pool of community property.
Spouses usually enter marriage with at least a few resources in their own names. Typically, spouses can protect property accumulated before marriage as separate property when they divorce. If spouses separate and live independently from one another for some time before they divorce, then the property that they acquire and the income they earn during the separation may also become separate property.
Spouses can also exempt property that they acknowledge as separate in a prenuptial or postnuptial agreement. People with business holdings, real property and other valuable assets may designate them as separate in a contract to ensure their protection in the event of a divorce.
Some assets acquired during marriage can technically be separate property. Gifts and inheritances usually remain the separate property of the beneficiary or recipient. The person claiming assets as separate property usually needs to have documentation supporting their assertions. In some cases, items that could be separate property become part of the marital estate due to commingling.
People preparing for divorce proceedings often need help going over their household financial records and setting goals for the community property division process. Understanding what assets are theoretically eligible for protection can make it easier for people to navigate the property division process.